Idea Cellular Ltd. the fastest growing of India’s five biggest mobile-phone carriers, offered 32.4 billion rupees ($757 million) for control of Spice Communications Ltd. to increase subscribers by a sixth.
Idea, owned by billionaire Chairman Kumar Mangalam Birla, agreed to buy a 41 percent stake from Spice Group for 77.30 rupees a share and make an open offer for a further 20 percent at a price that’s 41 percent higher than Spice’s close yesterday. Idea, whose chairman also runs cement and aluminum operations, will sell a 15 percent stake to Malaysia’s TM International Bhd. after the takeover. TM owns 39 percent of Spice.
Idea will add about 4.5 million customers, closing in on Bharat Sanchar Nigam Ltd., India’s fourth-largest carrier. India is projected by the telecom ministry to double its mobile-phone subscribers to 500 million in two years, after having surpassed the U.S. as the second-biggest market this year.
``By taking over Spice they enhance their position and secondly, they become a dominant player’’ in India, said Choo Swee Kee, who counts TM International shares among the $202 million he manages at TA Asset Management Bhd. in Kuala Lumpur. ``For TM International, to hold a smaller stake in a bigger ocean is better than to hold a larger stake in a pond.’’
Idea this year has been adding customers faster than larger rivals Bharti Airtel Ltd. and Vodafone Group Plc’s Indian unit, according to data from the Telecom Regulatory Authority of India. The combined entity will have about 30 million subscribers in the market of 269 million users. Bharat Sanchar had 41 million users in April, while Bharti, the nation’s largest operator, had more than 64 million subscribers.
Shares Surge
Spice surged 32 percent in Mumbai to close at a record 72.35 rupees. Idea climbed 2.8 percent to 101.90 rupees, its biggest gain since June 12. India’s benchmark Sensitive Index rose 0.8 percent.
Idea shares have dropped 27 percent this year compared with a 22 percent decline in the Bharti stock and the benchmark index’s 30 percent fall.
After the takeover, Idea will sell 464.7 million shares of the combined company at 156.96 rupees apiece to TM, Malaysia’s second-largest wireless carrier, the New Delhi-based Idea said.
``India is all about scale. The merger will result in scale being achieved, so it’s very positive for us,’’ Yusof Annuar Yaacob, chief financial officer at TM, said in a phone interview. ``A merger where we’ll end up having a stake in Idea is better than having 39 percent’’ of a smaller company, he said.
TM, which offers wireless services to 40 million customers in 10 Asian markets including Indonesia and Bangladesh, will gain a stake in an operator with licenses to sell services nationwide.
Yusof said TM will spend about $2 billion to get as much as a 19 percent stake in the merged entity and added he would fund it through debt.
Expansion Plans
Idea expects to start wireless services in Tamil Nadu, Bihar, and Mumbai, the country’s financial hub, by August, Birla told reporters in Mumbai today. The carrier plans to spend as much as 100 billion rupees in two years to expand services and complete the takeover in six months, he said.
The Birla family, which is one of India’s oldest business families, runs companies including Hindalco Industries Ltd., India’s largest producer of aluminum and Grasim Industries Ltd., the South Asian nation’s third-largest cement producer.
``We have already moved from being the sixth biggest to the fifth-largest player in the telecom business. Our objective is to build on that position of strength and move aggressively with our growth plans,’’ Birla said.
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